D’Amato Stock Deal Earned $37,125 Profit in Single Day
Sen. Alfonse M. D’Amato (R-N.Y.), who has led Republican attacks on alleged ethical breaches by President Clinton and his wife, reaped one-day profits of $37,125 in a questionable stock deal, according to a government report.
D’Amato, chairman of a special Senate committee that has investigated the Whitewater controversy for the last year, was criticized in a confidential report commissioned by the Securities and Exchange Commission. The report was made public late Wednesday by U.S. District Judge Joyce Hens Green, who said the SEC recommended its release and that D’Amato did not object.
The report said that the brokerage house of Stratton Oakmont of Lake Success, N.Y., violated its own rules by allocating shares of a hot start-up issue, Computer Marketplace Inc., to D’Amato’s account.
The deal is questionable, the report said, because it came at a time when SEC enforcement actions were pending against Stratton three years ago and while D’Amato was the ranking Republican on the Senate Banking, Housing and Urban Affairs Committee, which has influence with SEC commissioners.
The report said that the senator was allocated “a much larger number” of shares in the initial public offering than other customers with accounts of the same size. Although D’Amato was not accused of wrongdoing, the report said that the special treatment he received raises suspicions about the firm’s motive.
“Stratton’s bending of its own rules to service a United States senator who, through his status as senior minority member of the Senate Banking Committee, wielded influence over the SEC raises suspicions about Stratton’s motives,” said the report by attorney Charles Loewenson, an outside consultant to the SEC.
In the one-day transaction in December 1993--which the firm handled without D’Amato’s involvement--D’Amato’s account purchased 4,500 units of Computer Marketplace shares and warrants at $4 a unit and “flipped” them hours later when the offering became publicly available and jumped in price to $12.25 a unit.
The report was first described in Thursday’s editions of the Wall Street Journal. A copy was later obtained by The Times.
Loewenson reported that D’Amato became a Stratton client after meeting Jordan Belfort, chairman of the firm, at a D’Amato fund-raising dinner in February 1992. The report said that, according to a witness at the dinner, D’Amato asked Belfort: “Can you make me some money?” The chairman responded: “Are you sure you want to do this? They [the SEC] are looking at me. It would look bad.”
The report went on to say that D’Amato replied: “Since when is it illegal to make money in the stock market?”
D’Amato, however, told Loewenson in an interview that he opened an $18,000 account when he heard that a particular Stratton broker had been doing well. D’Amato said he told the broker, David Beall, “Here’s the money. Go to town,” the report said.
D’Amato said Thursday that when press reports first appeared three years ago about his profits in the Computer Marketplace transaction, he decided to place his account in a blind trust and instructed the trustee “not to invest in initial public stock offerings” like that of Computer Marketplace.
“I took the proper actions so that we would avoid even the appearance of impropriety [and] remove any questions about my investments,” D’Amato said.
D’Amato has been sharply critical of alleged cronyism in Arkansas when Clinton was governor and First Lady Hillary Rodham Clinton was a private lawyer. He has charged that Clinton improperly awarded state contracts to political supporters and that Mrs. Clinton benefited from her husband’s position in realizing $100,000 in profits over 10 months in commodities futures on an initial investment of only $1,000.
The Clintons have denied any improprieties. The White House declined comment Thursday on Loewenson’s findings.
In his report, Loewenson said that D’Amato “was permitted to open an account even though he didn’t come close to meeting Stratton’s qualification criteria.” The senator’s net worth was only $70,000 at a time when Stratton’s minimum requirement was $500,000, and he was given what amounted to a discretionary account “contrary to Stratton policy,” the report said.
A discretionary account is one in which the broker has authority to make buy and sell decisions without first consulting the client.
Stratton has had a series of troubles with federal regulators. It paid $2.5 million to the SEC in 1994 to settle fraud allegations. But the SEC later went to court with a complaint that Stratton was ignoring that settlement, in view of 87 additional complaints from customers.
After Green issued a restraining order, the firm paid an additional $1 million last year to settle the claims of former clients. Two months ago, Stratton was fined another $325,000 and its chief trader was suspended following fraud charges relating to an initial public offering.
Times staff writer Scot Paltrow in New York contributed to this story.
